Weekly Feed Market Commentary
Published 5 March 14
The uncertainty surrounding the situation in Ukraine, and its impact on exports, was the main factor behind the UK feed wheat futures price breaking through the £160/t level for the first time since early January on Monday 3 March. The London May-14 futures price reached £162/t on Monday, increasing by £5.25/t from the previous session’s settlement price. Prices closed higher on Tuesday, but the daily gain was only £0.5/t.
Although grain has been moving out of Ukraine, this has been predominantly on the back of previous trades and from supplies relatively close to ports. With uncertainty over how the situation will develop, further movement in the market will depend on the extent to which Ukraine can move supplies to ports, and if external shippers are prepared to take the risk of shipping Ukrainian cargoes. In its latest estimates, the USDA has forecast Ukraine to be the third largest maize exporter this season, behind the US and Brazil. It is likely that the market will switch maize demand from Ukraine to the US and South America in order to obtain increased assurance of delivery. This possibility has provided support to Chicago maize prices.
EU wheat export licenses have continued to be issued at a rapid pace, adding support to European prices. The current season’s total EU export licenses reached 20.2Mt as at 25 February, 54% higher on the year. US wheat prices also received support as USDA data released on Monday showed that ratings regarding US wheat conditions have dropped by 1-5% in Kansas, Nebraska, Texas and Oklahoma due to cold and dry weather conditions.
Results of the AHDB/HGCA winter planting survey indicated a return to a more ‘normal’ cropping mix for harvest 2014, with planted wheat area in England and Wales, estimated at 1.815Mha (19% higher than the wheat harvest area in 2013). The latest crop development report from ADAS indicated good progress for most crops, including wheat.
Soybean futures prices have continued to rise over the week. The Chicago May-14 soybean contract settled at $522.8/t on Tuesday 4 March, its highest settlement price, so far this season, with the nearby contract reaching $521.0/t, the highest value since mid-September. UK soyameal values broke through the £400/t level as at Friday, with Hi-pro (ex-store East Coast, March delivery) reaching £404/t, an £11/t increase on the previous week. UK rapemeal prices (ex-mill Erith, March delivery) were reported at £257/t as at Friday, a week on-week increase of £5/t and the highest level reached since June.
Concerns for the South American soyabean crop remain due to unfavourable weather, with the analysts, Informa Economics, reducing its estimate for the Brazilian soyabean output by almost 1Mt to 88.8Mt, and cutting its forecast for Argentine production by 3Mt to 54Mt. However, it must be remembered that despite these reductions to initial forecasts, the South American soyabean crop is still expected to be higher than in 2012/13. Export demand for US soyabeans has remained strong with total export commitments reaching 43.47Mt as at 20 February, an increase of 26% year-on-year.
The situation in Ukraine also provided support to EU soyameal prices earlier in the week, for the same reasons as discussed above. Ukraine is an important soyabean exporter for the EU.
Figures and commentary provided in association with HGCA and BPEX.
For further information on the cereals market click here to link through to HGCA website.